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Circular Carbon Market Report

2023 Analysis

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The Circular Carbon Market report is an annual analysis of the data collected in our Indexes over the last year, revealing investment, technical, and commercial dimensions and trends in the sector. We divvy up the analysis into four sections — the Circular Carbon Landscape, Investment Trends, a Focus on Carbon Removals, and Revenue Drivers — and answer critical questions within this framework.

The overall intent behind the report is to share our data in a way that gives more context, character, and depth to this emergent ecosystem, increasing overall interest and understanding in the sector, and that facilitates informed action between innovators and capital providers.

Capital Raised In 2023

To date, Circular Carbon companies have cumulatively raised $25.4B USD. While 2023 was a challenging year for capital markets overall, investment into the Circular Carbon sector held steady at $8B, representing a $370M increase from 2022.

To put this number in perspective, we compared the capital raised by Circular Carbon companies in recent years against the overall capital raised in the Climate Tech sector (as reported by Sightline Climate). In 2023, investment in Circular Carbon constituted 25% of overall investment in Climate Tech. While Circular Carbon investment has been growing each year, the wider Climate Tech sector saw a decline in the last year.

Share of Climate Tech Investments Made to Circular Carbon
Capital Raised by Circular Carbon vs. All of Climate Tech

Climate Tech Industry Data Source: Sightline Climate
CCN Data Coverage: 85.71%

Where Is This Capital Going?

Removal Companies Out On Top

Carbon removal companies raised 73% of all funding in 2023, netting $1.7B more capital in 2023 than the year prior. Of removal companies' $5.8B raised, 53% ($3.1B) went to companies focusing on air-based removal solutions (such as direct air capture).

It's important to note that about a quarter of Innovators in the Circular Carbon Index are pursuing a combination of solution types, with removal and conversion being the most common.

Deals Closed by Solution Type by Year

Data Coverage: 78.82%

2023 Deals Closed by Carbon Removal Pathway

Data Coverage: 67.48%

*Sums add up to more than totals because companies are classified as more than one solution type and removal companies are classified as more than one removal type.

Early Stage Capital is Increasing

Of the companies who closed deals in 2023, early stage funding (Pre-Seed, Seed, and Series A) totaled $1.9B. This represents 24% of all capital raised in 2023, and coincides with an encouraging upward trend in the number of early stage deals.

Later stage deals (Series B and beyond) accounted for 53% ($4.2B) of the capital raised in 2023, and we’re excited to see so many removal companies represented within this group.

Number and Amount of Deals in Each Investment Stage by Company Solution Type, 2022 vs 2023

Data Coverage: 82.33%

Who Is Generating Revenue?

Our reported revenue data reveals that 51% of the companies we track are generating revenue. Half of those companies are generating more than $1M.

Breaking down the data by company year founded, 70% of older companies — those founded prior to 2016 — are generating revenue and half are making more than $1M. Even as the majority of newer companies are not yet generating capital, it is encouraging that once companies can pass through one or two valleys of death, there are gains to be achieved in this industry.

Reported Revenue of All Companies

Data Coverage: 55.92%

Reported Revenue of Innovators in Our Index by Founding Year

Founded pre-2016

Founded 2016-2020

Founded since 2021

Data Coverage: 55.92%

Reported revenue is highest among removal companies, which also report the largest range of revenue. Conversion companies also have a fairly large range, with lower reported revenue than removal companies. Generally, point source capture and CCMI companies report having narrower and lower revenue ranges.

Cumulative Reported Revenue Ranges by Solution Type

Data Coverage: 55.92%

Revenue Drivers: The Carbon Market and Physical Products

Even though many companies have taken advantage of the robust government support recently made available to this sector, the revenue for Circular Carbon companies eventually must come from two major sources: selling physical products or selling carbon credits.

In 2023, companies making a physical product far outraised companies targeting the carbon market, $20.9B to $2.7B. Despite that, a higher percentage of carbon market companies (53%) reported that they are generating revenue (compared with 34% for companies making a physical product).

Physical Product

2023 Capital Raised by Companies that Make a Physical Product

Data Coverage: 83.96%

Reported Revenue of Companies that Make a Physical Product

Carbon Market

2023 Capital Raised by Companies that Target the Carbon Market

Data Coverage: 44.18%

Reported Revenue of Companies that Target the Carbon Market